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October 30, 2001
British Insurers Demand Corporate Social Responsibility
by Mark Thomsen
The Association of British Insurers recently announced that its members will expect companies to
disclose how social, environmental and ethical risks are being handled.
SocialFunds.com --
Last week, the Association of British Insurers
(ABI) continued the UK's embrace of corporate social responsibility by asking companies to disclose
their external social, ethical and environmental risks and their policies for managing those risks.
The ABI's new guidelines are intended to be a relatively painless method of increasing corporate
transparency.
 The guidelines follow an announcement made
earlier this year by major London-based asset manager Morley Fund Management that it would begin
requiring large UK companies to publish environment reports. Corporate social responsibility in
the UK received a significant boost last year when the government declared that pension fund
trustees had to disclose their policies on socially responsible investment.
The ABI's
announcement reflects its view that corporate social responsibility is fundamental to modern
business.
"[The guidelines] represent an important opportunity for investors and companies
to work together both to protect shareholder value and improve understanding of corporate social
responsibility," said Mary Francis, director general of the ABI. "Successful, responsible
companies are good for society and for their shareholders."
The over 400 members of the
ABI, a trade association for Britain's insurance industry, account for more than 20 percent of
stock market investment in London. Such clout ensures that companies will take the guidelines
seriously.
The guidelines ask companies to disclose information about the social,
environmental and ethical risks and opportunities they face. For example, the guidelines ask
companies to disclose board-level identification and assessment of risk, descriptions of company
policies for managing risk, and descriptions of procedures for verifying company disclosures.
"SRI disclosure will provide investors with confidence that a company understands the risks it
faces and is positioning itself to deal with them," said Chris Mellor, chief executive of AWG, one
of the UK's largest water utilities. "The ABI's guidelines are a crucial and valuable step in
helping companies prove to themselves and others that they are up to the mark."
The ABI
guidelines may preempt the introduction of mandatory government regulation. One of the objectives
in developing the guidelines was that companies could follow them without incurring huge costs.
"We are anxious to avoid unnecessary prescription or the imposition of costly burdens,"
said Peter Montagnon, ABI head of investment affairs. "Our focus is on enhancing value in
companies through effective response to risks."
The ABI hopes the guidelines will serve as
a basis for helping companies develop "best practices" in handling risks and opportunities
regarding social, environmental and ethical issues. While the guidelines do not require companies
to verify their disclosures, the ABI views independent verification as a potential best practice of
the future.
The ABI has also published a report that supports its approach to corporate
social, environmental and ethical risks and opportunities. Entitled "Investing in Social
Responsibility: Risks and Opportunities," it is authored by Roger Cowe and is available on the
ABI's
website.
It seems more UK companies are seeing the value of placing a higher priority
on social, environmental and ethical issues. Said AWG's Mr. Mellor, "I believe that understanding
environmental and social costs will be a major factor in building business success over the coming
years - through increased operational efficiency, better services and, ultimately, shareholder
value."
©
SRI World Group, Inc. All Rights Reserved.
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